Brent steady as weak Chinese oil imports counter global demand growth optimism

The front-month ICE Brent contract has shed $0.09/bbl on the day from Friday, to $86.30/bbl at 09.00 GMT.

PHOTO: Getty Images

Upward pressure:

Brent futures gained upward momentum last week after the International Energy Agency (IEA) forecast global oil demand to grow by 2.2 million b/d in 2023.

“Deepening OPEC+ supply cuts have collided with improved macroeconomic sentiment and all-time high world oil demand,” stated the Paris-headquartered agency. “With output cuts hitting the heavy sour crude market hard, Dubai crude is trading at a rare premium to Brent,” it said.

Earlier this month, OPEC+’s two biggest producers, Saudi Arabia and Russia, announced further supply cuts into September to maintain “balance in the oil market”.

Brent futures have drawn support from rising tensions in the Black Sea. A Russian warship fired warning shots at a dry cargo ship heading for the Ukrainian port of Izmail on Sunday, triggering tensions around the Black Sea area for exports from Ukraine and Russia, including commodities like crude oil.

Downward pressure:

Disappointing Chinese crude oil import data has thrown cold water on further Brent gains. The world's biggest oil importing country has been struggling to revamp its growth engine after detrimental blows from lengthy Covid-19 restrictions.

“China will be forced to deliver more stimulus,” OANDA’s senior market analyst Ed Moya said about China's recent pledge to ramp up the activity and consumption in 10 different economic sectors. However, no updates on these measures have been announced by the Communist Party Politburo - China’s state planner.

“China is key for global oil demand growth this year and the market has been getting increasingly concerned over the weaker-than-expected economic recovery,” said ING’s head of commodities strategy Warren Patterson.

By Aparupa Mazumder

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